good morning. the day's top stories, two key global interest rates decisions. an announcement is expected on a new treasury secretary for us. plus, reports that a major bank that made a huge debt on libor had a huge on profit. it's tuesday, january 10th, 2013 and "squawk box" begins right now. good morning want everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we've been watching the u.s. equity futures. at this hour, you're going to see dow futures up by about 31.5 points. s&p futures up by just over 4 points and the nasdaq futures are up by over 7. markets fear in the meantime has plummeted to preleemman levels.

traders say that the vix illustrates the central bank as backstopping the markets so that means there's less demand for downside protection. speaking of central banks, we have two key decisions to watch today. the bank of england is expected to withhold fresh monetary stimulus as the start of the new year gets under way. forecasters say that the economic data is still too mixed to try and trump inflation worries. the ecb also expected to stay steady, holding its key rate at .75%. policymakers are seeing refraining as the eurozone economy shows signs of stabilizing. we are going to bring you both decisions as soon as they are announced. and the ecb reports comes out 45 minutes later. first, breaking news out of washington. today, president obama is going to be announcing his plans to nominate jacob lew as the next treasury secretary. the president will be making that announcement at 1:30 eastern time in an event in the east room of the white house.

john harwood joins us now with more on that. john. >> andrew, president obama is going inside his inner circle to fill a key job as jack lew is somebody who served as chief of staff. he was budget director before that. he served in hillary clinton's state department. he does not have a deep background and ties to wall street and business. he's a creature of congress, made his name in washington working for tip o'neal, the house speaker. very hard working, very key, very bright. republicans found him a difficult negotiators in some of the budget talks over the last couple of years, but i would expect, andrew, that he's going to be confirmed pretty handily even though he'll have difficult questions in his confirmation hearing. >> john, how disappointed -- and perhaps now, but it appears that the business community seems disappointed, if you read "the wall street journal" editorial page today. there's a sense of disappointment that the

president didn't pick somebody from the business community, somebody with more experience in the world of finance private sector as joe would say. >> i understand the disappointment because they want one of theirs. but, you know, president obama wants one of his in that job. when he looks at the economic issues that are most important and most potentially dangerous for him over the next couple of years, it's how do you deal with congress? how do you deal with long-term fiscal challenges, how do you deal with the debt ceiling, entitlement reform, all of the things that jack lew has deep experience in. and i think that's the economic issue that he thinks is number one of his plate and he chose somebody who he trufts who he thinks can negotiate on his behalf and i think that's the issue. sometimes when presidents pick people from the business community, the business

community has an ambassador but is not an insider in the administration. we saw that in the bush administration early on. >> my next question, is there a chance for somebody of the business community talking about coming in from business community or is it difficult to get another member to join when you give away the big title? >> i think when you give away the big title, the biggest names are not going to want to come as somebody's deputy. i don't know how they're going to fill out the lew treasury department, but i expect they will take some care and attention to tending those relationships. but when you look at the big guns on wall street, they're not going to go in as somebody's number two. >> john, was jack lew the first and only choice? >> that's been the principal focus of speculation from the beginning. i remember having a conversation with roger altman who is a friend of this program and somebody that served in the clinton administration about

after the election how the president was going to fill out his cabinet. and he said if you look at the pattern that this president has followed, it has tended to pick people close to him who he feels very comfortable with. the criticism of president obama from some is that he's insular and that he has a very close circle. the positive of that is that it's a pretty cohesive group and he deals with people that he's comfortable with. and jack lew is clearly one of those people. >> you know, john, i know when you read the "new york times" editorialal page you know what you're getting when you read "the wall street journal's" editorialal pages you know what you're getting. but the point is, anyone that is still holding out some hope for a clinton-type packet more to the center is just becoming clear, more and more clear that that is not what we're going to get. the president has ideas about where he wants to take the country and there's no reason, once you're re-elected, why he

can't put his own people in that will further his goals. but you just read some of the stuff about if you were going to pursue a deal with republicans on tax reform or on pro growth policies, this is not the guy you would pick. if you were going to move more to the center and become more private sector oriented, this is not the guy you would pick. if you wanted to sort of the strides that were made in the first four years in terms of entitlements and what we've seen in terms of raising taxes now, if you want to extend those and entrench those, this is the guy, a foot soldier that you would put in place to do it and it's just -- i guess it's not a surprise, but any republican that is disappointed probably hasn't been watching what's been happening for the past several months. >> well, a couple points about that. first of all, you're right, this president, i think, having won elections handily in november is feeling a sense of confidence in who he is and the course that

he's set and his ability to prevail in that with the american people. that's one. second of all, you know, the president is the president regardless of who is around him. and you may remember after he was elected in 2008, some people thought what when he picked larry summers to head his national economic council that that was a clintonesque kind of -- >> bill daley. >> and when tim geithner was picked, having worked closely with hank paulson at the federal reserve bank during the crisis, people were comforted by that. they said, well, maybe he's not so liberal. well, as it happened, larry summers was an advocate of more stimulus than others in the administration. so you can't necessarily read that much. events are going to dictate, i think, whether this president adapts his own view necessary a way that people interpret it as going to the center or not. but for the moment, he knows where he is and where he wants

to go. and he's picking somebody who can help them achieve his agenda. >> you know, the thing you point out, that this is a situation where business leaders probably wanted one of their own, they may argue they want somebody in there looking for pro growth policies. but maybe more important is somebody who was very familiar with the financial markets. that was somebody that tim geithner created a lot of confidence because he knew the markets so well, knew the underworkings. and when there were big issues, you knew there was somebody who was going to be dealing with that. how do they deal with that when jack lew is the treasury secretary? >> well, you're right, becky. jack lew is somebody who knows the political market took place better than the financial markets. he did work at citigroup for a couple of years during the bush administration. but he's not deeply rooted in that world. he is a very smart and hard working guy. he did get a significant grounding in international

affairs. >> and he worked with tip o'neal and he watched reagan made some grand compromises, too. >> oh, yes, he did. including on the social security deal that greenspan, reagan and o'neill worked out. he did have grounding in international groupeding issues. so everybody has a point of assets and a set of holes in their resume. and you guys are identifying exactly right. so the things missing from jack lew, which is he is not deeply rooted in business and wall street or financial markets or financial regulation, it seems, anyway. >> john, thank you for this. we look forward to seeing more. perhaps we'll have some -- what? >> we've got a -- thanks, john. the journal, another piece i thought was interesting, just to

expand about the aig, you saw the media sneers at the whole idea of it. the government is worried about it because of what it says about the way it happened. and i think david royce will make that case when we talk to him today. in our news, aig announcing it will not join in that suit of the multibillion dollar bailout. the ceo bob ben lachey explains that position. >> this is the deal the government cut and we've been able to pay that back with a profit and we're moving forward. but hank is going back saying the shareholders paid way too much for that loan. and the government's response was you wouldn't be here if it wasn't for our loan. that's the argument and we feel we shouldn't pe part of that. >> but greenberg is not backing dune and he is being represented by david boies.

he will join us live at 8:00 a.m. eastern. if you read the journal, you can i wouldn't read why the -- >> the board of directors was unanimous, though. >> right. but if you were a former aig ceo or if you were a former shareholder, you might -- >> it will be interesting to see. they are going to continue to pursue the case, it was knocked down in new york and continues on in d.c. but if they win, it will be more interesting. >> even gm, which benefited from the government, you can see that they're chafed at being part of government motors in recent months. and i think aig, these guys would never admit it, but -- >> blame the former board directors. blame the people -- why aren't they suing the company, suing aig instead of -- >> they didn't accept it, it was forced upon them. >> here is the thing. i read the piece and it is worth

reading, everybody out there, if you have an opportunity to read it today. >> the government negative received the approval of aig's owners to seize the company, which is one of the -- >> but they expected to have a shareholder vote on whether or not we want this deal to be made? this is not a democracy. you chase your chances by investing and you may lose everything. >> if it was a frivolous lat, the government may not be as concerned as it seems to be. >> it was not thrown out the first time they asked them to throw it out. >> we'll talk to david -- >> just because you may have a legal ground doesn't mean that it's the right thing to do or that it's just. >> and i think there's a larger question about what's right for the country. and i think when you go back to the fateful days of september 2008 -- >> well, we don't know what would have happened. >> well, you don't really know what would have happened, but i do remember those days. you remember waking up and i watched you back then and how horrific things felt. and the idea that aig was going

to topple up, which it would have and declared bankruptcy, what that would have meant to the markets, what that would have meant to the economy i think is a lot larger. >> we build the bond that could bring down the economy and you're mad that it costs you money to defuse it. in the meantime, the government's consumer watchdog agency is tightening the mortgage lending rules on banks. the cftb will be forcing banks to verify a boor rower's ability to repay loans. the goal is to ward off the loose lending that helped push the economy into recession. diana olick sat down with the head of the ftb and she will join us with that conversation coming up at 6:30 eastern. right now, it's time for the global markets report. kelly evans is standing by in london. kelly, good morning. >> becky, good morning. it's been an interesting and exciting session here to some extent. we've seen the spanish ten-year

poke below r5%. this following a spanish auction where in their first big debt aukz of the year, they're 5.8 billion euros above their 5 billion target. here is what's happening across the curve in bond markets in europe. the spanish ten-year, 4.99%. in italy, 4.17%. the bund, meanwhile, about 1.5%. gilt just over 2%. the interesting point here, guys, is that part of the reason why this is we're waiting on the ecb's latest decision. they're not going to need to do much more if current market conditions prevail. this is a pretty good way for them to start. so that auction going well, spanish yields coming into euro. if i can give you a sense of what's happening in other markets, the euro is higher. european equities for the most part as you're looking there are mixed to flat. but here is a look at what's been grabbing our attention. up .3% to 1.31. that i just want to bring your

attention to. the all of points down there, you're looking at the dollar/yen. that's the other major story that we continue to follow. 88 was the level breached in trade today as the yen continues to weaken by the dollar by .is 3%. we'll wait to see if we hear anything more specific. if the central banks were to cut rates, it would be a major surprise to the markets now. but if anything, this business strength that we see will be continued if the ecb doesn't deliver anything, gives us more of the same. that decision is due out shortly. we'll keep an eye out for it. bank of england is expected to keep rates roughly unchanged. back to you. >> kelly, thank you. it sounds like we have a lot more to come from europe. we will we watching. google's eric schmidd is on his way home from a controversial visit to north korea. we have a live report right after this. this is america.

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welcome back, everybody. right now, dow futures run by about 28 points. yesterday, the do i finished up by just over 60 points. >> now today's national weather forecast. reynolds wolf joins us from the weather channel. reynolds. >> hi, guys. let's get started with what's happening out along the east coast. it should be a fairly quiet day for you. sunny skies and 45 degrees in new york city. 54 at cape hatteras. could see some clouds and maybe rain in atlanta before all is said and done. near record high temperatures for parts of central and south

florida. back out towards the west, the story not so much in terms of rainfall, but rather snow and wind. major delays expected for tomorrow out towards the west. but in terms of your delays today, not really an issue for you in places like atlanta, georgia, where we expect the clouds to build up. maybe some rain drops by the afternoon. but, again, no backups expected. just the opposite for you in chicago and st. louis. los angeles. we might even throw in san diego. could have some moderate delays in the afternoon hours. this is a quick snapshot on your forecast. let's send it back to you in the studio. >> thanks for that. joe. >> andrew, google's eric schmidt and former new mexico governor bill richardson are returning from a trip to north korea. eunice is joining us with highlights. they were going to look at hopefully diminishing the possibility of more missile firings and also access to the internet. i love that. because those two always go

together, i think, don't they? >> they always go hand in hand. it's all about technology there. >> yeah. >> so for the past several days, google's eric schmidt was basically on a tour of north korea. he and his delegation led by bill richardson visited several facilities including a computer lab to get a better sense of how the internet is there. schmidt determined that it was more open. he told the reporters after leaving beijing this -- >> once it starts, citizens the build on this. but the government has to make it possible for people who use the internet which the government in north korea has not done. it's their choice now and time in my view is time now for them to start or they will remain behind. >> schmidt says north korean

officials seemed receptive to technology exchanges, which is a good things. former ambassador richardson did agree. he pushed pungon for a moratorium on missile tests and this is after a rocket launch several weeks ago and he was serving for more information on a korean american detainee who he is told is in good health. richardson said as a private citizen, he was hoping the new leadership could be help to reset relations. >> the delay wasn't too bad. we visited. remember, eunice was here. >> that's right. >> very good. and it's good to see you. and have you return to us for "squawk box." we'll see you. thank you. now let's get to the u.s. economy and the markets.

joining us is chief economist jerry webman at oppenheimer funds. jerry, you see when you look around, there aren't too many tail winds in terms of the macroeconomic picture. that's not good news. we're looking at slow growth? >> i think we're looking at slow growth. there are some places in the world that growth is picking up. china came out with nebs that were better than we can expected. some of the emerging markets are better than we expected. but this is not going to away market here driven by macroeconomic excitement. it's going to be driven by companies that are able to figure out how to produce some growth and what's going to be an economic and political environment. that's going to be the story for 2013. >> we get a lot of people who come in who it seems to me lately there's a big divergence. there are those who are optimistic about things and think things will go well. others that say, forget it, we've seen all the gains. which camp would you put yourself in? >> i guess i'm not wholistically

in either camp. it's more an optimist than a pessimist. we've seen stock correlations begin to fall a little bit. that's encouraging. it says that investors are begin to go loor fop companies that figure out how to make money in a slow growth environment. not sure what the indices will do, but i think the companies that are positioned to save other people company. i was thinking about the people who sell cnbc their coffee cups. you don't do that. somebody has figured out how to do that on large scale and make a lot of money doing it. so those kinds of companies we're going to look for. that means selectivity. that means looking in place that's we don't like from a mook row point of view such as europe. >> but from the average investor who may have put their money in an s&p 500 fund or something, do you think they'll be in a tougher position this year? >> i think it's going to be tight 37 listen, it could be a very good year for the broad markets. largely because we've been so obsessed with this political

story and forgotten that companies know how to make money even when the political preference and politics don't follow our own preferences. so i'm not going to make predicts about the indices. i think people will do better if they can find the good growth stories inside the indices that use it from a market that's going to be a little choppy and is going to reward growth. >> yesterday, we spoke with jim cramer and some other people about the housing sector. that may be one that's turning. are there other sectors like energy other other places that you think are fun to be in a good position? >> you know, when i comes to things like energy and commodities, i like to look for the companies either that are able to get the stuff from here to there or are figuring out how to get away without using quite so much of it. the obvious energy names, i think that's pretty well done. although i can't comment to be an expert on the names in the sector. house sg on its way back. and then you may start wanting to look for, you know, who

benefits in the second derivative from those -- from the strength we're going to see in the housing market. >> other key themes, yesterday we is spoke with byron lein who gave us a list of predictions. one of them was the energy sector who said because you're going to see so much more production, you could see a drop in oil to $70. >> that's the privilege of watching this on an airplane yesterday. i saw byron's interview. and i know he came off pass mystic. remember there are some powerful, marginal players in the energy market. we need energy prices to stay high, particularly the big producers in the middle east. saudi can't allow oil prices to fall by a large amount. you noticed when they started to slip late last year, they were cutting back on production. so the interesting thing about energy from our point of view is that given new supply that's coming in the u.s. and the support that is coming, we're just in an energy environment

where the range of uncertainty has gotten smaller. both with respect to supply and with respect to price. so i don't expect to see exchange either way. we can pump a lot of natural gas a lot more adegrees ifrly. as the price goes up, the saudis, i think, will support prices if they go down too far because they need it to hold their political regime. >> so 85 to 90 is the new normal? >> i think there is probably some range that looks like that, but less concern about supply, as well. and that's a very good thing for businesses and consumeres and households and everybody else. >> thank you for coming on. by the way, what were you on jet blue yesterday or -- >> i was not on jet blue. i got up on united. i got to watch you on television. i enjoy it. >> so they don't have tvs in coach united? >> they do. you just have to -- well, i -- >> if you hadn't been upgraded, i could have watched --

>> i could have watched it, but i would have had to pay. i work for a company who -- >> sound toolish and pennywise. because what you would gain from listen to go byron wien would pay for that. >> joe, i can't tell you i wouldn't have done it. i can just tell you i didn't have to do it. >> you can get information here that's worth much more than that. >> you know, it's just a fortune. people gain a lot from cnbc. >> even when i'm on, there's something valuable. >> let's not get carried away. >> my pick is -- >> a lot of happy peep. >> coming up, we've got the head of the consumer protection pure sounding off on the august's new rules when we come back. impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? at t. rowe price, we understand the connections

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good morning. and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. making headlines, there's quite a piece of deutsche bank reportedly made about $650 million in profit back in 2008 from trades that were pegged to libor, which was manipulated. regulators have been investigating allegations that more than a dozen banks, including deutsche bank, rigged that benchmark rate, underpinning trillions of dollars in loans and other financial contracts in the journal cites deutsche bank documents which were handed to investigators by a former employee. the bank says the document shows

the first time the scope and the manner in which a bank constructed a string of trades in hopes of proting from little tiny changes in various rates. but that's a good number, yeah. i mean, that would give you some motivation if you could do it. 654 million? that's more than a rounding error if you were able to -- if you knew what the libor rate was going to be. >> how do they ever unwind all this stuff? so complicated. >> they're moving on the new system now. >> no, i mean, but how do they ever unwind -- >> oh, some of these trades? >> yeah. >> that i don't know. that i don't know. let's get to some quick news, herbalife is holding a conference today to fight back against bill ackman.

you can see what's going on with the stock there. herbalife's president is going to be joining us live at 7:30 eastern time. there's two other points that the s.e.c. enforcement unit is looking into herbalife as a result of mr. ackman's comments. and one note on dan yesterday, in his letter to ininvestors, he said he had taken a position in morgan stanley, which is quite interesting, because -- a long position because they have just laid off -- i think today is the day, 1600 people. and so you're going to watch that stock. >> and these are more senior level people. more senior level people, so they're looking to cut costs in a big, big way. but seeing as how investors are getting into that, i think that will be more of an issue.

>> and there are other companies like this. and i understand the way it works. i've been to presentations where it really does look like you're watching and .it's like, is there ever actually an -- is there ever actually an end user? all of the models she show you how you're going to become rich as a disriber, it has to do with recruiting more distributors underneath you that you get a piece of. and you wonder is it ever really the interface with the customer? and then the other thing about herbalife, a lot of the stuff knot fda approval type stuff. most of it is supplement. and the evidence is very, very slim that you can point to that shows the efficacy of any of the -- >> for a lot of things. a vitamin shop. you could question where is the

beef. but for herbalife, i want to ask the president, what is your one product that you can demonstrate efficacy that it really will help my health and my life or whatever it is with the supplements that you have. but the whole industry st fraught with people that take a thousand times of the amount of vitamin b that you need. >> i've been prone to taking more than i need. >> yeah, but most vitamins -- >> i know, the excess washes away. >> right. the cohen ziems and the reaction that you need there for the reaction, but you only need the amounts that you need for it to happen. anything over and above that is superfluous. and it goes out in your pee. so i'm not saying you shouldn't be able to make money with it. in fact, there have been some people who have made a lot of money. herb greenberg has a great documentary, which i watched

yesterday online. >> he's focusing on herbalife, which is perfect for him. >> he's been working on it a long time. he's dug into interviews, he's -- was the bottom line? what is the lead for herb's piece spp. >> the question becomes is it a upon zee scheme or not? he talks to the company, he talks to some of the distributors who have had complaints, say that they got drawn into it. in fact, the last quote is from a woman who says this is not what i signed up for. >> do the products help anyone? >> i didn't dig into that. that part was not brought up in these 20 minutes. >> what's the biggest products? >> i don't know. they talked about the shakes and the system. >> what do they supposedly do for you? >> but it's supposed to be a weight loss thing, right? i don't know. they dug into that. but the biggest questions they asked were is it worth it for the suppliers getting involved for the new --

>> also about the potential predatory marketing does it actually work? the vast majority of people who actually become distributors in the first year, not only do they not become millionaires, but they ultimately lose money and that ma means for the families -- >> if i was going to sell some herbs, i would move to colorado and get a huge distribution chain beneath me. >> remember what they said about denver, that there are more of the legal pot places now than there are starbucks. >> and you know that can help people. you know that has an effect. >> i don't know about that. >> i'm kidding. >> anxiety and things like that, right? >> maybe. all right. we'll talk more about this a little later. again, we have the president of the company, the ceo of the company coming up at 7:30. in the meantime, the government's consumer watch agency is tightening the mortgage rules on banks. diana olick joins us with the details from washington on this. this is an interesting story.

we've been waiting to see what the cfcd would do, diana. you sat down and spoke with them. >> yes. we've been waiting a while for this. under dodd-frank, lenders are required to verify a lender can repay a loan. it will constitute a qualified mortgage. that is a loan that will be sold and securityized going forward. all of this is designed to protect borrowers from the ills of the past decade. first off, on the ability to repay the loan, that means lenders have to check everything. no more low dock or no dock loans. they'll have to check employment, income and credit history among other things. next, there could be no excess coins and fees, only up to 3%. that includes those used to compensate brokers and loan officers. there can be no more toxic loan features, such as terms over 30 years. interest only loans, negative

amortization interest. timely, there's a cap of how much a borrower's growth income can go to debt. that's 43%. plus all your other debt payments like credit cards, car loans, your total payments cannot exceed 43% of your growth income. >> it's a common sense rule. lenders should pay attention to the borrower's ability to pay. i think it will be a great assist to the mortgage market. number one, lenders will be able to have confidence. they now know the guardrail is in place. they're not being set up to fail. now, there are some temporary exceptions in this. loan that's don't meet the 43% debt to income ratio, but do meet government abilitier on other standards. they will be considered qualified mortgage. so what is this view to the banks? well, it can protect them from borrower lawsuits if they can prove that the loan meets these qm standards. we've talked to a bunch of

investors just since yesterday when we saw these rules. they said this is going to help bring the private label market back to mortgages. >> diana, are there some banks -- so many banks have talked about the cspd and what they're doing with real concern, real care about what's happening with bankers. some sate they're kerchbtd about the terms not being set, where they can find a reason why they should go ahead and give that loan. will banksers get on board with this or say it is too onerous? >> so far the people we've spoken to say they will get on board. this will be the standard as to how to sell a loan. if they have someone they believe can repay these loans, they're going to sell it on their books. but if they are going to sell it

to fannie or freddie or fha, they are likely to have to have to follow these standards. >> if you have comments or questions about anything you see here on squawk, e-mail us at squawk@cnbc.com. looking at twitter, people weighing in on herbalife. some people are saying it's modern day snake oil. some say that the prescription drug industry is the evil and that natural supplements are the way to go. >> worth passing along new york post now reporting that carl ikahn is reportedly getting involved and going long on herbalife. remember, you had einhorn make some comments a couple months ago that makes you think he was on the ackman side of the world. so i don't think we've had a divided -- >> and looking at where the sock is and their feeling about the stock has nugd to do with thinking the product is good.

the early read on today's trading session from the futures pits in chicago, after the show, the fun isn't going to end. join me on facebook for a question and answer session. for me, it's just about not, you know, pulling a brent mussberger. i don't want to become famous for some answer i give. it's very close. there will be someone there that either allows owe or doesn't allow me to say what i'd like to say to these answers. but that makes it worthwhile. as we head to break, a look at yesterday's winners and losers. at 1:45, the aflac duck was brought in

with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card at getwellduck.com. how did i know? well, i didn't really. see, i figured low testosterone would decrease my sex drive... but when i started losing energy and became moody...

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welcome back to cnbc's "squawk box." bob iaccino jones is from the cme. let's get a check on the markets, bob. what are we looking at this morning? >> before we start, i want to make sure lobe, ikahn, i have no position in herbalife.

>> are people talking about that over there or not. >> not as much. the s&p seems to be basing. crude seems to be basing. the interesting part about the markets right now is it's very easy to go long, you it's difficult to stay long. i'm very positive on swrarn, i'm very positive in the fist quarter, but it's difficult with the longer term problems that we have. i don't remember who said it on your show, but a day or two ago, somebody was talking about how it's difficult to look at it as being a good year with the longer term problems we have. i think that's making it easy to sell out of long. i expect the s&p to test those highs at 1470 again. but i don't know the there's enough volume or sort of push to the market to break through them with any sort of substantial close above. >> you know, we had byron wien on yesterday and he suggested that we could see a bit of a pop, sort of where you might be, but ultimately there would be a -- potentially to brick us back to where we started this year. is that how you see things? >> i totally agree. you know, the earnings season

has a positive spin to it, at least. we're very early on. i think that most of the market participants, again, are looking for dips to buy. the s&p has based, tried to go down a couple of days ago and didn't really succeed. so i totally agree with the test at 1470s. what's the positive to long-term news that's going to come out? you'll have the debt ceiling. until and unless that becomes a grand solution, a longer term solution where they seem like they're working together, it's very difficult to look at longs abdomen being a quarter or a half proposition. >> also looking at more volatility on the debt ceiling or, what did we just experience with the fiscal cliff? >> i know, i think it's going to be more from a price perspective. but i don't actually expect the vix to spike. the strange thing about the vix is you have to get the long positions and the options to push that up. i think this is expected volatility. i think it's going to be more of a lack of volume volatility.

it's going to be one of those things where people don't want to take positions coming into that. january, i think, is going to finish positive. >> bob, thanks for joining thus morning. >> thank you. >> thank you. coming up, we'll have more of the story that have us plucking this morning. plus, a new way for you to rise and is shine in the morning. plus, wake-up calls. we'll have the details when squawk comes back. some day, your life will flash before your eyes. make it worth watching. introducing the 2013 lexus ls. an entirely new pursuit.

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welcome back to "squawk." an exciting day at cnbc. i can look over there or over there. which way would you like me to look? we're launching our alarm clock app on the iphone. this is actually a very cool thing. it's a cnbc app that wakes you up with our voices. could be a little scary. but you do join and spend time with us in the morning anyway. >> we'll startle you out of bed. >> but more importantly tells you the news and what's coming up on "squawk," you can see what they're talking about with jack this morning. what the futures are. so it's actually, i have to say -- >> rise and shine and thanks for walking up with cnbc i'm andrew ross sorkin and it is go time. get up and make your best move. >> this is one of the sounds that you could have. >> good to choose. >> i'm joe kernen, thanks for letting cnbc be your wake-up call. get realtime financial market

coverage and business -- >> that doesn't even sound like you. >> have a great day. >> can you get -- do we have? here's becky. >> thanks for waking up with cnbc this is becky quick. whether you are working or playing today make sure you're prepared. check in with us. it's okay to hit the snooze button -- >> did you do any with -- >> hi, baby, wake up? >> oh, you're waking up. >> we did play around with them. i don't know if any of them made the cut. >> why? >> what about -- >> what about the -- >> i worry about stock positions. >> no one got -- >> then i'm thinking -- what about the animal -- >> there's an animal orchestra. >> is there an animal orchestra? >> i'll play it into my mike. >> this is -- >> that will get your day started. >> oh, that's -- you can listen to amanda drury.

this would be interesting, get over the alarm clock. you could wake up to jim cramer. this is the noise you'd wake up to. >> rise and shine! >> that's a lot to wake up to. >> i'm jim cramer. >> got to be really up. >> by the way, if you don't want to hear our voices wake you up, there are just regular old sounds. >> i think you can get a rooster. >> you can get a rooster. there's horns. you can even get, look, you can get -- where is this here? you can get the -- the little nbc chime. >> you could actually wake up to the opening bell. would you like that? >> what do you do? how would i -- >> he just did it a few seconds ago. >> i downloaded the app. >> just on an iphone? >> you can do it on an ipad. >> i think you probably can do it on an ipad. any kind of "i" device. the most important part is actually just the -- the swipe. once you wake up, and you don't have to wake up necessarily

listening to us unless you really do love our voices. can you see there's lots of difference news. >> do you go to the apple store? or the cnbc store? >> you go to the app store. >> you go to the app store? >> in my case, i just typed in -- >> don't hand write stuff, right? >> i don't know if it's available -- >> i just typed in cnbc alarm clock and i pressed download. put in my pass word and it's free. i got it. it looks good. >> are you open to rerecording some things if we get a lot of requests for that? >> you want to write the scripts for me. >> i just -- >> there's a way you can read them. i'll write the scripts with a lot of double entendres. a lot of things you can't really get nailed on necessarily but that sound -- all right, becky. don't you think we can do that, right? >> they should have a second version of the app. also these apps have to get approved by apple and they are very strict. >> are they? >> they are. they don't allow --

>> any type -- >> any type of -- >> i would play music -- >> i would do the background music, and have becky saying hey, big boy, the markets -- >> wake up, baby. >> there we go. >> i don't think -- >> pimco -- >> you know i'm thinking of steve jobs and -- >> i know. >> it's -- >> i'm going to do it with my ipad, too. anyway when we come back. an interesting -- interest rate decision from the bank of england is just a few minutes away. plus president obama set to nominate jack lou as treasury today. roger altman will join us on set as our guest host for the next hour. "squawk" will be right back. ♪

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talking treasury. who is america's new top money man? the nomination of jack lew and what this means for the markets. reaction from former deputy treasury secretary roger altman. stocks in focus. the most important themes for investors. get the names before trading begins, with jason trennert. >> and the herbalife war of words. >> herbalife is a pyramid scheme. >> now another activist investor disputes these claims. we're going to get a response from herbalife's president as the second hour of "squawk box" begins right now. good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. the bank of england is leaving that key interest rate unchanged. that is as expected at one half of one percent. the futures this morning, still looking like the dow is up by about 30 points. s&p futures up by just over 4.25 points and the nasdaq up by about 8 points right now.

let's get to a few of your morning headlines today. apple could be taking a key step toward boosting sales in the key chinese market. apple's ceo tim cook met today with the chairman of china's biggest wireless carrier, china mobile. the company would only say that they talked about matters of cooperation but the meeting is raising hopes that apple can strike a deal for china mobile to offer its iphone. also deutsche bank made a profit of at least 500 million euros in 2008 from trades pegged to libor and other global interest rates. that's according to "the wall street journal," which cites internal documents. the revelation comes amid libor rigging investigations that are already resulting in settlements with barclays and ubs. and stock exchange operator bats says a system error caused executions could create transactions not at the price available. the total dollar impact was just over $420,000 and it has disclosed the error to the

s.e.c., the customers and to the public. aig is now announcing it will not sue the u.s. government over terms of the company's multibillion dollar bailout. the insurer deciding not to join the legal action being led by former chief hank greenberg. ceo bob ben moshe explaining the company's decision. >> this is the deal the government cut, and we've been able to pay that all back with a profit and we're moving forward. so -- but hank's going back and saying the shareholders paid way too much for that loan. >> right. >> and the government's response is, you wouldn't be here if it wasn't for our loan so that's the argument, and we feel that we shouldn't be part of that. >> greenberg, however, is not backing down. he's being represented by well-known attorney david boies and he's going to be joining us live at 8:00, eastern time. >> herbalife is holding an investor presentation in new york today to fight back against claims made by bill ackman, the pershing square investor called it a pyramid scheme and suggesting that the stock will go to zero.

meantime, yesterday, dan lobe, third point, that fund disclosed an 8% stake in the company and betting that the shares will go higher. and then what do we know about icahn? >> the new york post is is reporting that call icahn has also gone long. >> also gone long. we're going to have the president, dez walsh, herbalife president. >> not president obama. >> will be on at 7:30. i don't think president obama has weighed in on herbalife. yet. >> but he is weighing in on who's going to be the next treasury secretary and he plans to nominate jack lew to succeed him -- to succeed him? to succeed tim geithner as treasury secretary, elevating the white house chief of staff into the administration's top economic post. cnbc's steve liesman now joins us with a look at exactly what lew will be left with once geithner leaves. steve? >> andrew, thanks. the treasury secretary job in this post-financial crisis world, has expanded. let's take a look at all the areas where -- the treasury

secretary jack lew will now have to face including the old ones and the new ones. the first obviously coming up the debt ceiling and more. the things he has to figure out is he's got to negotiate a sequester deal and a debt ceiling deal with congress or figure out how to run the government without any debt. in other words, match cash flow to expenses. second item is long-term he's got to come up with entitlement fixes and a fix for the longer-run deficit. finally, tax reform, corporate and individual, potentially on the table. i think jack lew is probably pretty strong in this particular area. but the other aspect which was always there but has now risen significantly in importance is global finance. he is the stand-up man for the next meltdown. he's got to finish and keep negotiating dodd-frank and the basel iii accords with international regulators. that happens underneath the treasury secretary. and what about housing, fannie mae, freddie mac? another big topic on the table. and dodd-frank does not fix or

finish the too big to fail issue. that remains on the table. then there's all the stuff we used to think about the treasury secretary's job. the spokesman for the greenback, negotiating with china, and other of our trading partners. and, of course, the g-20, the imf, the world bank, and of course, the business community. so, if you could take a wider view of all this, the debt ceiling that was always sort of there never quite as intense as it is now. global finance, bigger part, almost a new job for the treasury secretary. oh, i didn't even mention dealing with iran and sanctions. and of course this was the normal brief of the treasury secretary. joe, i have to say that i've covered seven treasury secretaries, in various forms of intensity over the years. jack lew is probably comes to the job with the least independence of any of the seven. whether or not he can gain that independence in the job, unclear to me. i would point out that that independence is something that serves the business community and markets, but also, would serve the white house in that

they'd have somebody with at least the perception of independence to speak to their proposals. i don't think jack lew brings that to the table. whether or not the other attributes he has make up for that we'll have to wait and see. >> i was going to ask you if you didn't end your report with that, i was going to ask you to say what you just said, what you said to me off camera -- and i'll tell you, when you said it, i'll tell you what struck me. sometimes i think you're implying that if the administration needs to sell something to maybe the private sector, it helps to say, you know, geithner's for it. or it helps to say paulson was for it. it helps to say robert reuben is for this. and in this case they won't necessarily be able to make that. but they don't -- see where i disagree with you, i don't think they care that they don't sell it. they don't need to sell it. >> i don't care if they care. they should care. it does matter. we are entering really interesting times when it comes to a need to rethink our

corporate tax system, rethink our individual tax system. rethink entitlements. all of these things. it would have been, i think, beneficial to the white house, more beneficial, i think, to have an independent voice getting up in front of congress, palming up the business community and speaking for those proposals rather than the former chief of staff. >> it wasn't going to be you. but there's a guy with us -- go my signature is not good enough. >> i wish it had been the guy we had. >> it could have been -- >> i wish it had been. >> we talked on tractly about roger, right? roger's been in the business community. >> i'm going to read something and i'm going to -- i'm going to argue with roger. not argue with him, but i'm going to make him defensive about all this if i can, because he is on our side. he's down. because i've read your editorial. and you remember that one specific editorial that you wrote, roger, about it was almost telling the administration, back off on the business and private sector bashing. it's important for the economy that -- you remember that one that you wrote? all right. now let me just read this.

here's the "journal's" take and the "journal" says what the "journal" says and "the new york times" says what "the new york times" says. the "journal's" editorial, obama is assembling a team of personal add ideological loyalists whose job will be less to offer independent advice than to advance and implement his agenda for larger more redistribution of government. mr. lew is a washington lifer whose expertise is politics. he brings no special knowledge or experience in economic policy, private industry or global finance, and roger, one of the criticisms all along, of the obama administration has been they don't really care about people with private -- >> you have a long way to go. >> i happen to think jack lew is qualified. look, he's been omb director twice. >> we haven't had a budget in three years. >> he's been chief of staff. he's extraordinarily familiar, we all know, with congress. if you think about the issues immediately ahead which are largely fiscal, he couldn't be better prepared. he has the confidence of the president. he's going to be smoothly confirmed. those are critical criteria. for example, you can't afford in

this environment, both globally as well as relative to congress and fiscal cliff, too, you can't afford to nominate someone whose nomination is going to be hung up on the hill. you can't do that. >> former senator judd gregg i heard him this morning saying, look, whether you agree with him or not this is a man who's qualified and he will pass. >> and he's respected on both sides of the aisle. >> and he worked for tip o'neill when tip o'neill was negotiating with ronald reagan and that's an important point. >> he was 20 years old. >> and how long was he there? how long was he with tip o'neill? >> how old was he? >> one quick point about independence, is that you can nominate and put in that job people who have the perception of independence and then they lose it. i think guys like john snow and paul o'neill, nobody looked at as giving an independent opinion. >> right. >> and there is a certain place right now for loyalty and the guys who are going to go and give the administration's point of view. the trouble is, that, again, there is -- if you think about the fed when it comes to finance

issues being, well, the most independent one body we have, the treasury secretary should be somewhere between the white house and -- >> i like jack snow, he wasn't some rip-roaring -- >> right. he wasn't out there. >> and lloyd bentsen. >> we had bentsen before we got robert rubin. >> even think about paulson. >> was he good, bentsen? >> bentsen was very good. bentsen was a person of enormous stature -- >> as a senator. >> in general. clear independence. he's very decisive. >> he's not a markets guy like -- >> rubin -- >> take it back to paulson. >> you think about why hank paulson, very sort of, like publicly negotiated his independence before taking the job. >> right. >> that was because of the tradition that had happened -- >> one thing i think you might be missing is that, and i've studied this, the history of treasury secretaries, who have never before been to washington, is not a confidence building

history. people forget, for example, that hank paulson is in washington and omb before he became treasury secretary, even though there was quite a big interval between the two. that just isn't a very good record. i know people like to say, why don't we get ceo "x" to be treasury secretary. >> the very valid point. but you also want someone, given the changes in the global markets, and given the changes in that job, just since the financial crisis, the one thing that concerns me is having expertise when it comes to the market. because if there's another huge black swan event, there's something bad that comes out of europe -- >> let's wait and see who the whole team -- >> you know. i feel like you know more than sometimes -- >> i like to know. >> is there other people waiting in the wings from the business community that are getting ready to take a deputy slot? >> bill dal daley is going to go back -- >> maybe not. >> i never know more than i might appear to know. but i really don't know who they have in mind except that. we don't know the whole scene. so we don't know who the treasury secretary will do.

we don't know whether the president will make other changes in his economic team or not. i don't know. so let's wait and see to becky's point, who the whole team is. >> roger, is it over, is it not true to say that he will be more inclined to try to find revenue to pay for entitlements as they are, rather than does this mean this isn't a guy who is ready to make a deal with republicans? >> he's a bit of a deficit hawk though. >> that's another thing this points out, if you thought that the president was going to pick someone who will negotiate the grand bargain and work with republicans on reforming entitlements, this is not the guy. this is a guy who wants to -- the entitlement gains that have been made in the last four years, he wants to entrench those and pay for them. >> i don't agree with that. >> that's not true -- >> i don't agree with that as follows. at least in terms of where it's all going to end up. one thing people are missing is that the united states is doing, however much we're doing it in stages and however much the process is ugly, we're doing more deficit reduction than people think. people forget that at the last

deficit fight, mid 2011, we all remember that, launched the budget control act. budget control act mandated, by law, $2.3 trillion of deficit reduction. $1.1 was the cap on the discretionary spending. $1.2 came out was the sequester that came out of the failure from the super committee, right? now we just did the american taxpayer relief act ten days ago, we just did approximately $700 billion further deficit reduction. $2.3, plus 700 is -- >> -- got put off. >> by two months. >> we're not going to do that. >> wait, joe. in two months, what's going to happen? i know lots and lots of people think the sequester is going to be canceled. >> right. >> i don't agree with that. maybe i'm wrong but i don't agree with that. because, if -- if the republicans should lose the debt limit fight, meaning a dollar of increased spending cuts for every dollar of increase in the debt limit, and the choice ultimately is between no spending cuts at all, or

allowing the sequester on march 1st to take effect, i believe we're going to do the second. remember, any -- to further postpone, shrink or cancel the sequester you need to pass a law. and that law by definition needs to go through the house which republicans control. so i believe that there will be that $1.2 trillion of additional deficit reduction most likely the sequester itself, possibly a replacement package of spending cuts, but we're going to see those spending cuts. and so at that point we will have had $3 trillion of deficit reduction, by the way simpson-bowles said four, so that's three quarters of what simpson-bowles said. everybody loves simpson-bowles. $3 trillion of deficit reduction, $2.3 of which will be on spending. i foent think people are focusing on how much deficit reduction is actually happening. >> this is happening in spite of jack lew, not because of -- >> i'm just talking about how much it's happening. >> i know. >> it's a surprising amount. >> what do you think happens with the sequester? >> i think they have to get some -- i think they can't get none of it. and i think they get some of it, i think the president was wrong, he got that piece for free. i don't think he got it for

free. i think he's got to give up something in the way of spending cuts and he's got to do it without raising additional revenue. and i think this is a way that jack lew, if it becomes known, this is something he's advocating for along the lines that roger talked about, could assert his independence from the white house, and i just wanted to say to what becky was saying that, you know, when i said earlier he's the stand-up guy for the meltdown, i'm pretty sure i know who is in the club of global bankers and finance ministers. i'm pretty sure jack lew is not a member of that right now. >> right. >> now, whether he does follow the trend of appointing technocontracts into these jobs, rather than politicians. i will give them that in that more and more there's been a sort of, you appoint the guy with the expertise to run finance. he's got that expertise. and it's not like it's a closed club. it's something he could certainly join over time. being a budget expert he knows these guys and has run across them. >> he up thely -- >> how's your self-image today? is it okay? >> it's fine, what did i do wrong? >> i just want you to be in a

good mood. you did not do a wake-up alarm -- >> no, i was not invited -- >> but they got you to do, if you're having trouble sleeping, apparently. you have -- >> oh. >> here's -- >> this is for at night, instead of ambien for some -- >> you have to figure out is he's got to negotiate a sequester deal and a debt ceiling deal -- >> so you're upplaying insomnia -- >> and the liesman app for sleeping. >> long-term -- >> i don't care how -- >> as long as i'm useful in some way. >> all i ask in this life. >> i don't really care. make them laugh or make them cry. >> they put that together -- >> i think my goal -- >> there is going to be an update because people are already asking, not only for steve liesman but also for rick santelli. >> all these people come up to me and say i wake up to you in the mornings for which i say, i am sorry. >> that was actually one of your reports with that lullaby. >> with that lullaby baby. >> that music. people are like, i can't sleep.

>> and instead of counting sheep -- >> how good are they in the back? >> they're good. >> thank you for that, joe. i appreciate it. >> by the way, this is for nausea, if you -- >> i -- >> we've got to correct ourselves. >> there is an android version of this. blackberry is coming, soon, too. i know you're all waiting. >> i'm going to do it to my ipad. >> i'm negotiating to be a beta tester fog the new blackberry. i'm going to give it one more shot. >> okay. >> okay. all right. still to come this morning we will talk more about the battle over herbalife. coming to a head today when the company holds its investor conference. we'll get the company's response, the hedge fund activist investor bill ackman ahead of that meeting. herbalife president des walsh will join us in just minutes. quick look at the futures. the dow futures up by about 25 points. s&p up by just over 3 1/2. "squawk" will be right back. ♪

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take a look at shares of tiffany. the luxury good retailer says sales for two months that ended december 31st were unchanged from the prior year. tiffany said that was below its own expectations. the company also sees full-year earnings at the lower end of its prior guidance of $3.28 to $3.40 a share. the current street estimate is

$3.26. and again, though, take a look at it. it's down about 8.5% in the free market. earnings are the focus for the markets right now. jason trennert is chief investment strategist and managing partner at keyingous and i know you have some themes for 2013. what is the major overriding theme? >> the major overriding theme is buying the big dips and moving towards cyclicals. it's hard enough to get the direction right once, much less tries on a market in any given year. i'm trying to do that for some silly reason. but i think that the first half of the year is going to be very rocky. i think there's going to be a meaningful correction. but i think that's going to be the opportunity to go long. and that's mainly because i believe in financial repression, and i think that you're going to get negative real returns from treasuries, probably for the next 5 to 10 years. equities might be your only shot. >> equities might be your only shot. but again when you say buy on

dips, where do you look at -- off the current level? how much of a dip do you have to see? >> we actually are one of the two people on the street that believe that earnings will be down this year. earnings, you know, were only up 3% last year, while price return was 13.5. so it was almost all multiple expansion. we actually have earnings down a little bit. so somewhere around the 1200, to 1250 level on the s&p i think would be very, very compelling, given our outlook for earnings in two vr 2014 which are currently at around 106. >> byron wien joined us yesterday and interestingly enough that was one of his surprise predictions, as well. you would see an actual droop in earnings from the s&p 500. but when -- you know looking at things like that. you're looking at slow growth but you still say stocks is just the best house in a bad neighborhood? >> i think that's, you know, becky, if you look at individual investors, and it's going to take a long time to get them back, but maybe more importantly if you look at fiduciaries, endowments, pension funds, they are grossly, i believe,

underweight equities, probably overweight alternatives, and they have very high actualial assumptions. so it's going to be very, very difficult to make those actual aerial assumptions without taking more in the risk of equities. the alternatives are not quite as liquid and they've also been disappointing in terms of the performance that they've returned to investors. so i think that's really where the action is going to be. it wouldn't surprise me, we mentioned this a couple weeks ago, that you get a new nifty 50 or maybe a new nifty 250 of stocks that candidly have almost bond-like characteristics in terms of the strength of the balance sheets, but they wind up being, you know, very compelling for investors looking for yields. >> jason, want to thank you very much. we will have you in the studio again soon to talk more about it. >> thank you. >> coming up, hedge fund rivals clash over herbalife. one calls it a great opportunity, the other a pyramid scheme. herbalife president des walsh is going to join us on the set to set the record straight.

an interview you can't afford to miss. stay tuned. at 1:45, the aflac duck was brought in with multiple lacerations to the wing and a fractured beak. surgery was successful, but he will be in a cast until it is fully healed, possibly several months. so, if the duck isn't able to work, how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card at getwellduck.com.

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if you have comments or questions about anything you see here on "squawk," e-mail us at squawk @cnbc.com. you can also follow us on twitter. up next the fight over energy shakes, protein bars and supplements. now, herbalife is here to set the record straight. the company's president joins us next. i don't spend money on gasoline. i am probably going to the gas station about once a month.

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welcome back to "squawk box" this morning. in the made lines we're going to have an interest rate decision coming up from the european bank in just a few minutes. that's at 7:45 eastern time. most economists think the bank

is going to hold the key rate steady at three quarters of one percent. although some think the ecb rate is possible. we're an hour away from the labor department's latest data on first-time jobless claims. economists are looking for 368,000 new claims for last week. 58 executives each sold stock valued at $10 million or more back in december, as potentially larger tax rates drew closer. that's according to "the wall street journal's" review. as a result of those moves, and the subsequent increase in tax rates for those earners, those executives saved themselves potentially millions of dollars. now for the big story of the morning. activist investor bill ackman unveiling a massive short position on herbalife last month on cnbc. he then went on the attack. take a listen. >> herbalife is a pyramid scheme. herbalife inflates the suggested retail price of its products and overstates retail sales. -- substantially greater than the retail profit they generate. >> yesterday fellow hedge fund

manager dan loeb challenged the validity of ackman's claims. herbalife is holding an investor meeting later this morning to respond to the claims made by ackman and concerns about the company. joining us now from new york is des walsh, president of herbalife, with a review of what we are likely to hear at this meeting later today. good morning to you, des. >> good morning, andrew. good to be with you. let's help set the record straight. >> let's do that. and if you could, spend 30 seconds just teeing up what exactly you plan to say today about bill ackman's claim that this is a pyramid scheme. >> here's what we're going to hear. what we're going to hear is that bill ackman's claims represent a gross distortion of the reality. that herbalife is a great company, we're a legitimate company, we've been in business for 32 years. we have tremendous science-based products that are very high in health and safety and efficacy and we've got a tremendous business opportunity and we're proud of where we are today and confident about our future. >> okay, des, let's talk about the pyramid scheme thesis for a second. first, of your distributors,

every year, new distributors join the forces of herbalife, and invariably the argument is made that a large majority of those distributors at the end of year one don't become the millionaires or even making $100,000 or $50,000 or $10,000 that they see in the ads but ultimately that they lose money. pis that true? >> absolutely not. here's one of the fallacies we're hearing from pershing square. what the research shows is the majority of our distributors become distributors because of their affinity with the product and they want to receive a discount. so essentially they're almost like members, club members just like in costco. that's the reality. most of the distributors come for that product discount. of those distributors who come for business opportunity, absolutely they make money. our core training is for a new distributor who wants to build a business. if they talk to 10 customers a day, 10 people a day about the products and business opportunity. i have never spoken to any distributor who is doing that,

who's actively engaged who is not making money. >> now, you have said, and the company has said, that it requires all of its distributors to keep the name, contact information, item purchased, and paid price for each customer and to retain those records for years. so, there's a question. why wouldn't you take all of that information, and disclose it about your distributors, about what they've sold, about the numbers, to help clear up some of this information about, and allegations about a pyramid scheme? >> so here's the reason. first of all, we recognize that we are a b2b, we sell to our distributors. so we have a tremendous data base with the activity of our distributor customers. what you're talking about is something entirely different. you're talking about the customers of our distributors. recognize that our distributors are independent sales people. this is their business. so that customer data is their data. and that's why from our perspective we recognize their right to privacy on that data. secondly think about it from a customer of that distributor. if you're a customer of that distributor and you're a weight

loss customer maybe you don't want your data being stored by a company that is remote from you. so regardless of your affinity you say i'm a weight loss customer, i'm not sure i want my name in a data base. >> i understand what you're saying except for this. ultimately, when the ftc looks at companies, and defines what a pyramid scheme is, it's whether your distributors are making more money on the distribution side. signing up new people, than actually selling products. if you can answer the question about selling the products by providing this information, wouldn't that actually help your cause? >> so, andrew, in our presentation to our analyst investors you'll actually hear a detailed response to that because we're absolutely committed and we have data to validate that the vast majority of revenues of sales comes not from recruiting, but from the sale and consumption of product. that's absolutely critical. the other thing i'd mention is this, andrew, in other because of all the noise on this issue, we commissioned a well respected research firm lieberman to

actually identify the number of consumers. and what their research found is that we have 5 million u.s. households purchasing products in the last three months. so let's just lay this ghost to rest. we not only have a huge distributor customer base but in addition we have a huge number of customers outside the network. >> des, one of the issues that bill ackman raised was this issue of the pop and drop. which is to say that herbalife has said that in markets where you opened, there are oftentimes, after you've opened, there's a pop and drop with sales, experiencing in the first few years. why is that -- and what other company, consumer company like this, has the same experience, and it goes, again, to this issue of a pyramid scheme to suggest that it starts off well, and ends badly within a year or two, because there's not enough other people to get behind the scheme? >> andrew, one more time, another gross distortion, and gross misrepresentation of the truth by a short seller motivated by profit.

here's the reality. the reality is when you look at the numbers, and we're going to show these numbers today in our investor meeting what you're going to say is literally approximately 90% of our volume in 2012 through september, over 90% came from markets open more than five and ten years. it is mature markets that are driving our business. not new markets. so, again, what he's saying is absolutely distortion of the truth. >> one of the other issues that came up was the disclosure that the company made about what is a very high percentage of latinos doing your distribution in the u.s., and the question has been raised by bill ackman and others about whether these distributors are undocumented immigrants. do you have a number on that? >> absolutely. so here's where our policy is every single distributor who comes to herbalife is required to provide a taxpayer i.d. number. there's no issue here. again this is just one more case of you've got somebody motivated by profit and greed helping to

frankly create smoke and create distortion. if you think about it, another charge is we're actually going after the latino community because in some way this is an impoverished, uneducated group. and frankly our latino distributors and customers find that insulting. if a supermarket chain begins to operate or opens up a new store in an area that is economically deprived, they're cheered and applauded. because they are bringing good knew trigs, they're bringing jobs to that community. yet when we support the latino community in some way this is a company going after people who aren't able to make an educated decision regarding their nutrition? frankly it's insulting to us, it's insulting to our customers, it's insulting to the ebb tire latino community. >> des, i sat through bill ackman's presentation live and one of the most compelling parts of it was when he put up images of your brochure for herbalife clothes which looked beautiful and gorgeous, and then went in what he described as real life, they sent cameras around the country to look at some of these quote/unquote clubs and they looked very different. they look nothing like the brochure.

they had no signage on the outside. there was no lights. literally the windows were closed. they were in horrible neighborhoods. it just, the whole thing, i have to say, it was one of those moments in the room where i think a lot of people said, huh. what did you make of that? >> you know, andrew forgive me. but you characterize those neighborhoods as horrible neighborhoods. let me tell you, that's where -- that may not be where you live, andrew, it may not be where mr. anman lives but the reality is those neighborhoods are warm, caring neighborhoods. we all wish we lived in a neighborhood like that. and today, in our analyst investor meetings we're going to show you some of those same clubs so you can get to see the heart and the soul and the warmth and the love that exists in those clubs. so, please, let's not characterize these places as horrible -- >> i apologize for that -- >> these are wonderful places. >> these clubs were in back all alleys, some of the images were -- really did raise questions relative to the marketing piece, and i think that's the important piece. >> absolutely. so andrew let me explain to you.

first of all, why do we not permit signage? we are direct b2b business. we're person to person. we're not in the retail business. we don't want to attract customers in off the street. that would be a retail occasion. these are clubs. these are places where people come together in a social environment to enjoy herbalife products, to learn about good nutrition and the benefits of a healthy, active lifestyle. it's not about attracting passersby. that's why we restrict signage. for that new distributor who's working from home, we don't want them to feel that their economic opportunity is less because of those fixed locations. so when you understand the logic behind the rules, then i think you understand that this is simply to protect our business model, to protect what we term the second sale of another distributor. >> des, can i ask you a question, too? i sat down and watched herb greenberg's documentary, the 20 minutes of it that are available online last night and one of the biggest questions that i came away from it was what kind of turnover rate do you have for people who sign up to be distributors? because it did interview a few

people who said that they had signed up, they thought this was going to be something that helped them, help their family get by, they could do maybe while they were a mom working at home and doing these things and they felt that they were misled by that. what kind of turnover rates do you? and how many complaints like that do you surface? >> yeah, so, you know, i watched the same video and whenever we see those stories it's always distressing to see. but here's the reality. those stories are not representative. how do we know? again, research. so again, one of our commitments is to a fact-based conversation. so let's have that fact-based conversation. here's the reality. what the research indicated and remember they went out and surveyed distributors who had left the business, these so-called pershing square would determine failed distributors and they went out and spoke to some of these people and what they found is that over 60% would still recommend the business opportunity of friends and families. so frankly, in any new business, there is a risk of not doing well. the reality is, the majority of people, who even if they decide, listen, great company, great products, just wasn't right for

me, the majority still say, hey, you know what? i would still recommend this to friends and family. >> but what is the turnover rate for people who try and sign up to be a distributor? how many of them are still doing it a year or two years later? >> so, here's what we share. what we share is that our sales leader level, because that's the level where people are building a business, we have the highest retention rates in the industry in excess of 50%. if you compare that to the success rates of anybody else starting a traditional business, what you'll see is those success rates are significantly higher. >> is that sales leader does that mean of all the people who sign up a year later 50% are still selling it? or is that people who make it to a certain level, they're still selling it? >> people who make it to a certain level. so let's talk about all the people who don't make it to that level? >> well here's the issue. >> yeah. >> please, go ahead. >> no, what i was just going to say is, in terms of the way you market the company, when you see some of the advertisements and things on youtube and the magazines and other publications you put together, invariably, you think, when you join

herbalife as a distributor that there's a good chance that you could become rich, wealthy. and the question is, whether you think there should be better disclosure in those ads to say, whatever percent, and you're not telling us what the percent is, but whatever that percent is that your chances of this actually happening, to say, 50% of the people don't actually, you know, wind up with a lamborghini or more? and i imagine it's more. >> sure, sure, yes. so here's the thing, and every time we run one of those businesses we tell people to go to our website where we list the levels. in herbalife we have a tremendous business opportunity. we are proud of that business opportunity. and what we say to people is this, if you come in to this, if you desire to build a business, and remember the majority of our distributors, they become distributors in order to receive that discount to become part of herbalife, but if you come to build a business and you work hard and you operate your business with integrity and consistency over a period of years you can achieve a level of

income. that's the reality. and we don't want to run from that. but at the same time you're absolutely right we do want to make it very clear to people that it has to be based on hard work, on consistency and operating your business with integrity. >> des, my question, i have, you know, i used to live in l.a., i've watched the company for years, and i just never really thought, i guess, in my own view that there was anything really proprietary or special about the product. whether it's a soy shake to lose weight. i mean maybe they're not harmful. maybe they're, you know, maybe people do lose weight, but you could get the same thing in a slimfast or a weight watchers. so, if they were just, you know, and the distribution system was normal just in some -- at a store, and everybody had their product on the same shelf, there would be no way of putting herbalife in the forefront. so, that's what people's questions are. that the whole distribution network is to make it possible to sell this stuff as if it's -- is it advantageous to the product that other companies are selling in any way, des? is it superior?

>> absolutely. and here's why. here's what you're missing. look, here's the reality. 32 years in business, consistent growth over that period of time. in the united states our oldest market growing by double digits. and yesterday as was pointed out we don't spend a lot on advertising. so what is it -- >> distribution, but what about the products themselves? what is superior about the products? >> let me finish. here's what's driving that growth. it's product results. that's the only thing that would be fueling this growth after all these years. and that's what you're missing. it's two things. it's product results, and secondly it's the fact that our products come with the support of the distributor. look, let's get real here. the reality is this, if you are trying to weight loss or nutrition program the hardest part is sticking with it, right? so many people, they join gyms, they get personal trainers, six months later they're off them. the hardest part is sticking with it. what a distributor ads is in terms of value, in terms of training and support, in terms of mentorship, in terms of consistency. that's part of the magic of herbalife that frankly if you're not part of this business you

simply don't understand. >> des, two more questions for you very quickly. the first, have there been any impact on sales or distribute sign-ups since bill ackman went public? >> our distributors are totally focused, totally engaged, and you know what? if anything, this situation has absolutely energized -- >> so it's gone up or down? >> -- i get to talk to distributors -- >> has it gone up or down? >> listen we're a public company. i can't comment about what's happening in the fourth quarter. here's what i can tell you our distributors have never been more energized, talking to more customers every single day. >> news emerged yesterday that the s.e.c.'s enforcement unit is looking into this situation. have they contacted you and do you know what this investigation is about? >> so, we've issued a statement. that statement says that we contacted regulators, beyond that i'm not going to comment. >> final question, there's a long, and questionable issue about barry minkel the short seller who was involved shorting your company several years ago. our ceo came on cnbc, they ended

up paying barry about $300,000. he said he was paid $300,000 originally because there was a lawsuit that he was trying to settle a lawsuit. after he left the set, it became clear that there was actually never a lawsuit. can you give an explanation for why your company paid a short seller $300,000? >> absolutely. so here's the nature of the conversation. we knew that for barry minko was coming forward with was absolutely false and distorted facts, misrepresentations. by the way, very similar to what's happening today. barry minko is now in jail again as a convicted felon. so when all these noises were coming out, we had a decision, do we sue him, engage in a lawsuit in order to protect the reputation or simply say, look, this is a nonissue, let's make this thing simply go away because it's a distraction on the business. that was a business decision we took. today it's being mischaracterized but that's the reality. and that's what companies do every day. there are nuisance issues, nuisance lawsuits and pay people

to go away. not sure it's right but it's frankly part of the american legal system what's happening today. >> des, we are grateful for you joining us this morning to try to help clear up some of these issues. and i should also mention coming up this morning after the herbalife conference the company's ceo michael johnson is going to talk to cnbc first during "squawk on the street" probably around 11:45 eastern time. and our own herb greenberg has been working on this report for ten months, it's a cnbc investigations ink project called "selling the american dream" the full report on multilevel marketing and herbalife including a full-length documentary can be sound online right now. >> we got to go. distribution helps you stay with it, the network. it's almost like you have a sponsor i guess. to lose weight. i don't know. i kind of understand that. up next, final thoughts from roger altman. and later the star lawyer representing hank greenberg, the farmer aig chairman and ceo,

david buoys will join us to discuss the suit against the government, contending itover charged for the bailout. ♪

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welcome back, everybody. let's get some parting shots from our guest host for this hour, roger altman. we're coming up against the debt ceiling. this is the momentary calm before the next storm. how is that going to shake out? how do you see it playing out? >> well, i think it's likely that the fight over what i'll call fiscal cliff 2 is going to be bigger and tougher than the one we just saw 379 that's

because you have two things coming to the. you have the debt limit and the sequester. i don't think people are paying enough attention to the role of the sequester. because while both parties dislike it, democrats dislike it, because it's yet another cut in domestic discretionary after the budget control act of 2011. republicans don't like it because it also cuts equally defense. >> right. >> i think the odds of canceling it or getting rid of it some other way are low. and after all, it is spending cuts. so, the -- the unusual part of this is that both of these events come together at once. and it's a little mysterious to me as to why. the deal we just saw, or at least the white house side of the deal, included a two-month delay in the sequester, put it right there in the middle with the debt limit. i'm not sure what the reasoning there was. >> the president has said that he will not negotiate over the debt ceiling. is it conceivable that republicans will say, fine, we'll send the debt ceiling but the sequester we're not budging on? >> what i think is going to

happen is there's going to be a big -- there's going to be epic fight over the debt limit. and ultimately i don't think the republicans are going to win that because i don't think the public, and by the way, nor the business community, agrees that using the debt limit as a method of pushing the united states to the very edge of default -- >> why not say go ahead, we're not going to win that on a pr fight? >> when all of the fighting is kind of winding down, there's the sequester $1.2 trillion of spending cuts. that's a lot. as i said earlier you add it up it comes to $3 trillion over the last year and a half. that's also a lot. i think the most likely scenario is that the sequester goes ahead. now remember, congress can undo it any given moment that it decides to pass a bill supers e superseding it, so it's not locked in for ten years in some way. congress can undo it but i think it's going to start. >> roger, thank you very much for joining us. we will have you back again soon. when we come back, we are joined by super mario. it's time to play the stock picking game with one of the best in the business. this is $100,000.

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how will he pay for his living expenses? aflac. like his rent and car payments? aflac. what about gas and groceries? aflac. cell phone? aflac, but i doubt he'll be using his phone for quite a while cause like i said, he has a fractured beak. [ male announcer ] send the aflac duck a get-well card at getwellduck.com. i am probably going to the gas station about once a month. last time i was at a gas station was about...i would say... two months ago. i very rarely put gas in my chevy volt.

i go to the gas station such a small amount that i forget how to put gas in my car. [ male announcer ] and it's not just these owners giving the volt high praise. volt received the j.d. power and associates appeal award two years in a row. ♪ says no to its former ceo's lawsuit against the government but hank greenberg isn't backing down. we'll talk to his lawyer, famed

fortunate david boies. >> confronting america's debt crises before the clock runs out on our credit limit. we'll talk to ver aphone ceo doug bergeron a member of the fix the debt campaign. >> and breaking economic news. we're going to get the closely watched weekly jobless claims at 8:30 a.m. eastern. the third hour of "squawk box" starts right now. welcome back to "squawk box" here on cnbc. first in business worldwide, i'm joe kernen along with becky quick and andrew ross sorkin. joining us for the rest of this hour, mario gabelli. gamco investors. we will talk individual stocks, as well as the macro investing environment in just a minute. but, becky has your morning headlines. >> we do. in fact, president obama is going to be nominating current chief of staff jack lew to replace tim geithner as treasury secretary. lew served as omb director under

president clinton, and then again under president obama he also worked as a managing director at citigroup. he's going to be taking the lead negotiations with lawmakers who are confronting america's debt crisis, and try to avert harsh spending cuts that are set to kick in on the first of march. but as we just heard we'll see if that actually happens or not. the president's going to be making the nomination official today at 1:30 p.m. we do have some breaking news just out from ford. >> doubling its dividends. stocks up a little bit. doesn't take much to go up 1% when you have $13 stock. but it was a 20 cent per year dividend. it's now going to be 40 cents per year. the yield was just under 1.5% so this will push it up to a 3% yield so ford doubling its dividend. payable on march 1st, 2013. so 40 cents goes from a nickel a quarter to a dime. >> also the european central bank and the bank of england both leaving key interest rates unchanged this morning. we've been watching european equities and at this hour you can see that mixed performance.

but modest with moves in either direction. the cac is down slightly. the ftse and the dax in germany both up by just points. germany the dax is up by about 24 points. we've also been watching u.s. equity futures which have been indicated a little higher this morning. right now the dow futures up by 38. the highest level i've seen this morning. right now the s&p futures up by just over 5.5. take a look at shares of tiffany. the luxury goods retailer says that sales for the first two months -- for the last two months that ended december 31st. that is the key holiday period, were unchanged from a year ago period. the company says that that was below its own expectations. tiffany also says that it sees full-year earnings at the low end of its prior guidance, that was $3.20 to $3.40 a share. the current street estimate comes in at $3.26. >> the other big news, aig deciding not to join former chief hank greenberg in his lawsuit against the government. greenberg claims the terms of the bailout were not fair to shareholders, current aig ceo robert benmoshe explained the

company's decision on closing bell yesterday. >> this is the deal the government cut, and we've been able to pay that all back with a profit and we're moving forward. but hank's going back and saying the shareholder es paid way too much for that loan. >> right. >> and the government's response is, you wouldn't be here if it wasn't for our loan, so that's the argument, and we feel that we shouldn't be part of that. >> greenberg isn't backing down. he's represented by famed antitrust attorney david boies. chairman of boies, schiller and flexner. >> good to be here. >> so you met with the board of aig, presented to them yesterday. they came back with the decision saying they weren't going to pursue this case with you. i have to imagine you understood going into the room, the politics of this. the view, the public view that this was biting the hand that fed you. >> unfortunately that is part of a story that the government has put out and some people at aig

have put out. in fact, that's not what's going on at all. what happened was, as everybody knows in 2008, the government made a loan to aig. this was pursuant to a section of the federal reserve act, section 13-3 if it matters, that was set up following the depression to allow the government to make certain loans. and there are limits to what the government can demand in return for those loans. it can demand an interest rate, and it got eight very high interest rate here. it can demand full security, and it got full security. what it cannot demand, as a court in washington, d.c. has already ruled, is that the company give up its equity. that is, in effect, that the government is allowed to take over a private company as part of this loan program. and yet that's exactly what happened. and so what we're asking for, in court, is to get back the value of what was illegally taken. and this is a case in which the

federal court of claims in washington, which is the court that you bring these claims to, has already ruled that our legal theory is right. the facts are all laid out in congressional and inspector general reports and the government's own documents. so there is a sense in which this is a easy case to litigate, and the unfortunate thing is that while stars national is able to go forward and recover. >> and that's hank greenberg's company. >> that's hank greenberg's current company, other shareholders, because we tried to bring an action not only on behalf of star international but on behalf of all shareholders, so that they would share equally in the recovery. now aig at the government's request, the government was there yesterday, too, really demanding that aig not support this lawsuit. and so the question is going to be what happens next. >> david, you mention that the litigation is -- you said it was

an easy case. well that was the suggestion. the case was thrown out from what i understand in new york. it's only going forward because the court in d.c. has allowed it, correct? >> it's a little bit different than that. the case in new york, was just a case against the federal reserve bank, put breach of fiduciary duty when it ran aig, and what the court in new york held, was that you can't sue a government agency for breach of fiduciary duty. we think that's wrong. but that has nothing to do with the constitutional question that is posed in washington. indeed the court of new york expressly said that. the court in new york expressly said, the case on the constitutional claim is going forward in washington, d.c. >> david, let's just take one sort of big step back from a philosophical perspective. let's forget about the technicalities. when you think about the government stepping in to save aig and ultimately, some would

argue, the rest of the system at the time. your client herb greenberg has argued that the preferable outcome would have been for aig to go bankrupt. is that right? >> look, that would be -- that was one alternative the company had. and an al tern that might have ended up better for shareholders. but the key thing -- >> and greenberg. >> we've been on herbalife all morning. hank greenberg. >> i'm going to be on herbalife in about 30 minutes, too. >> a lot of greenbergs. >> the issue, really, is not whether the company should or should not have gone bankrupt. the issue is whether, when the government makes one of these loans, it seine titled to take over the equity of the company. and that's what the court in washington has held the government's not entitled to do. remember the government has admitted that this loan was fully secured. the government said so at the time, and the government has admitted in this lawsuit that the loan was fully secured.

the taxpayers were never at risk. in addition, the initial interest rate was an eye-popping 14.5%. the highest interest rate the government has ever changed anybody for a loan. >> it's also the most money the government has ever given anyone for a loan. >> it is. it is. and as a result they got a very high interest rate, and they got a huge amount of security. that is the security matched the amount of the loan. more than matched the amount of the loan, as the government has repeatedly said. >> david, i won't argue your legal theory because you lay out a very strong case and i can understand exactly what you're saying on all these different situations. but there is still that philosophical question that just because the law is on your side does not make it right. if we go back to those times, those were very perilous times. we didn't know what was going to happen on a lot of levels. as a result of the government stepping in, aig was able to maintain the majority of its workforce. these were thousands and thousands of people who were not put out of work. if the company had gone into

bankruptcy, the shareholders would not have fared well, either. it just makes me wonder, do you ever stand back and look at this and think, okay maybe the government did the right thing and maybe we are biting the hand that fed us? >> the government did do the right thing in making the loan. the loans were set up for exactly this purpose. the bank was supposed to make these kind of loans. what they were supposed to do is get security, get an interest rate, even the high interest rate, but not take over the company. assume -- go back to hurricane sandy. suppose -- team is sent out to rescue people and rescue goods that are being in threat of being swept away. and comes to a shop and the shop has some valuable things in it that are about ready to be swept away. if the fire and rescue people don't cart them out of there, they're all going to be lost. and fire and rescue people say, okay, we're going to cart them out. we're going to protect them but we're going to take 80% of them to the firehouse.

everybody would know that was wrong. it's also illegal. -- >> yeah but in the store owners position they didn't do anything wrong and put themselves in the path of that storm which is exactly what aig did. there was wrongdoing on aig's part. >> remember, the shareholders are the ones that are being punished here. >> but the shareholders are the ones who are taking the risk. when you are a shareholder you understand that you may get the upside of any profit but you also take the downside of anything that happens. >> of course you do. and the question is, do you take the downside of the government doing something illegal? the facts of the matter -- >> david the argument, nobody knows if it went into normal bankruptcy how much shareholders would have recouped. nobody knows. and hank greenberg can say -- he can make the case and say i know for a fact that my assets -- that the assets of that company are much greater than the liability. and for the government to be able to assign a systemic risk that opens up the possibility of the government assigning systemic risk to any company that it wants to basically see. >> absolutely right. >> and that's why this is such a

slippery slope that you almost had to take this case to do it. >> you had to take this case. you couldn't let this go. the precedent would be terrible. because what congress set up is the government can make loans when you needed to do that to stabilize the economy. not to take over companies. this was not designed to be a avenue for the government -- >> we've heard the same thing about gm and the way that that was done, and in that case it was senior bond holders where the rule of law suddenly didn't apply anymore because the government decided, well, wait a minute, the distributors, the systemic risk -- >> exactly right. >> suddenly the government is in the business of deciding and nobody knows the counterfactual and nobody knows how things would have played out. i disparage lawyers but thank you. otherwise, if you don't have the rule of law, what do you have? >> exactly right. and that's why this belongs in court. and that's why all of the people that are saying don't bring -- >> the media. >> i think it's just wrong. >> david, what's the next step

in all of this? >> we're right in discovery right now. we've taken depositions already of the general council, the federal reserve bank, the chief restructuring officer of the treasury department. we're going to be taking former secretary of the treasury paulson's deposition. we're going to be taking tim geithner's deposition zblip can you sue aig in all of this, the board, now that they've made the decision? >> a shareholder might be able to do that. we're not going to be doing that. i think the aig board struggled with this issue. i think they made the wrong decision for shareholders. i think the government argued to them that the board would be embarrassed if it now bite the hand that feed it kind of argument. >> right. >> i think that was unfortunate. but we're looking to the government, we're not looking to aig.

>> david mario gam belly is on the set. >> well done, i'm glad you're moving ahead on this and good luck to you and hank. >> thank you. >> from my point of view, my understanding is if you go into bankruptcy you lose a lot of your nol. this company emerged with an extraordinarily wonderful nol that the shareholders get the benefit of. so if any contingent lawyer sues them for not pursuing this the government could turn around and say, hey, be nice you're going to lose your nol. that's a very valuable asset. the second part of it is the high yield market in '08, going rates were like 30%. for debt. i mean you know, hank has got a point, you're got a point, good luck. >> remember the issue, though, is not should it have gone into bankruptcy or not. i do think bankrupt was probably a better alternative. but that's really not the issue. >> we agree with you on a legal point. >> david the other part of it is, if you had seen what was happening at the time, i mean, you're right about the laws, and about everything that stood there but it doesn't take into

account the public outrage at what was happening at the time. >> there was a public relations issue. and what -- >> but it's more than public relations because if there is unrest that builds as a result of that, that is the functioning of the government. >> right. so we need to make clear to people that the real threat here comes from the government. and that just because people are unhappy, nobody got prosecutioned in the financial crisis, they shouldn't take it out on shareholders, particularly shareholders who were not driving the bus at the scene of the accident. the people who are driving the bus go off scot free and the shareholders get punished. now if they take that risk, that's fine if it's a legal risk. but when what happens is the government overreaches and oversteps, and confiscates assets and doesn't have any authority to do, that's a different story. >> you're much more reasonable now. now when you were trying to harvest those hanging chads, and those democratic counties, i used to watch you then and i said wow, this guy will say

anything. now what happened? you've come around. >> exactly. >> david while we have you here we have to talk about herbalife. you were hired a couple weeks back and they do have their presentation today. what is your role relating to herbalife and potential investigations and lawsuits? >> we were retained about a week before christmas to look at a rash of statements that were being made about the company and its business. and consider various alternatives. and we analyzed whether litigation is the right approach. whether trying to get the regulator and enforcement agencies involved in taking a look at what appears to be market manipulation is the right approach. we're trying to deal with -- >> and have you done that? >> and we have done that. and we're going to be talking about some of that, and analyst meeting is going to start in about 44 minutes. >> and is there any possibility, i mean bill ackman has called

this company effectively a fraud, not a ponzi scheme but a pyramid scheme. potentially, is there a case against him? >> i think there is and i would leave you just with two statistics, okay? one statistic is 32 years. this company has been around 32 years. it has been growing, throughout that period. growing both in sales, profitability, and customers. second statistic is 90%. 90% of the company's sales comes from areas that -- in which the company's been operating for five years or longer. so this is a area where the company succeeds. it's got a history of success. the idea that it's a ponzi scheme or that there's some kind of fraud going on is not accurate. pershing square is going to have to decide why it's making those kind of statements. if we have to litigate it maybe

we'll get into some discovery about it. but the fact of the matter that this is a stable, growing company, that's been growing for 32 years, it's going to continue to grow, and our job is simply to make sure that market stock isn't manipulated with inaccurate statements. >> david, we're going to thank you for joining us. we'd love to have you come on back, maybe bring you to the studio. also wish you a happy 15th anniversary. >> thank you very much. >> so thank you for joining us. >> are you wearing sneakers, david, right now? >> i'm wearing not sneakers. i'm wearing merrills. >> merrills? close to sneakers. >> that is kiengd of a sneaker. you're a sneaker wearer, that's okay. >> do you own full disclosure? do you own wolverine worldwide? >> no. >> thank you, again. see you soon. >> when we come back we will have much more from our guest host mario gabelli. we'll get his read on the markets plus his best investing ideas right after this. still ahead, lawmakers have a little more than a month to defuse our fiscal time bomb.

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welcome back, everybody. shares of nokia, the company says its fourth quarter outlook exceeds its previous expectations. >> let us talk now finally with our guest host mario gabelli. gamco's chairman and chief investment officer. i know you've been able to listen in to a lot of the show today. and i mean there are people that effectively run those, what is it called, mullaly level marketing systems, right? it can be done and be very profitable for a company. >> forget about profitable for the company. it's a product the consumer likes. it's a product that the distributor can make money on, and what's the bell rings, avon calling? wasn't that multilevel? everyone has different forms of doing it. i have not done any analysis --

>> you've never invested in any? >> well we bought a few shares of blythe for different reasons but they're also doing products they distribute as well in the health care market. we owned a fairly significant piece in the 28 billion nutritional market of which these products are a subset. >> how about the -- >> that was avon -- that was shift nutritional more in the vitamin area. >> the $28 billion. and you said this is 10% or something. >> that's what i saw. and also consumer reports has a study within the last week or two about this whole area, what's right, what's good. but i don't have a real dog in this hunt, so i'm not >> we're through the cliff, got the debt ceiling, got the sequester. that's all still background for you, siths just noise, no? >> let's go to some simple issues. the world is $75 trillion. the united states is 16% of that. europe is 22%. but china and japan are 21% and they've got new leaders and they're stepping on the

accelerator. abe and li are starting to push. that's helping the export picture. when i talk to companies in the last couple of days, because of their releasing of earnings, december was not good. a definitely of uncertainty crept in again. similar to what happened in '08, and you you can see that hope lfl i that's starting to come back. >> all of the emotion associated with everyone turning on television and wondering what's going on with this country. so short term you've got the impact of the next one sequestration coming up. you've got the next one dealing with the debt limit. then you have long-term structural issues. then you have to deal with the following. if i'm getting paid every two weeks my first check is going to have $40 less if i make less than $50,000. companies are saying they're putting notices in there to explain why that happens.

so we've got the payroll shock in the next week, when you get paid on the 15th of the month. in addition to that we pray no drought. wow, what happens if we have another extended period? the agricultural department said something about winter wheat and the impact it's having. if i look into 2014, you know, europe is going to incrementally be behind us. the euro and the dollar are now crossing over so the impact on translating revenues with assets, particularly european assets into u.s. dollars, is incrementally no longer be a negative. in addition to that we haven't come to deals with the tax structure. we've talked about this the day after but the fix was a lot of taxes. do we take it down 128. the one thing we don't have to have is another shot of increasing revenues again by raising taxes. we need some visibility.

>> but we're going to do that. current interest. i'd like to see -- >> anyway -- >> if it doesn't go your way, you still don't care, though. >> within that framework i look at earnings. >> yeah. >> what are corporate earnings going to be like? what's the multiple to apply to earnings? multiple of earnings is a function of interest rates. next year or two they're going to start rising. >> right. >> the second part is psychology. you could see the investors, and their intermediaries, the brokers of the merrill lynchs, the rias, and so on, and the institution saying starting in about the middle of september/october, we want to take a look so the amount of money has been pulled out, i'm starting to see it coming back. and that anticipation of the dynamics is a very powerful offset. how long can it go? you know, admiral farragut said this in mobile bay, damn the torpedoes. now the investor ready to say damn the politicians, let's

focus on fundamentals. and within that framework the fundamentals look very bright, and the valuations are not high, there's not a great deal of margin of safety. and things can go wrong. i mean, you know, the iranian thing, food and fuel. another year of a drought is a problem. another year in which some other dynamics, but within that framework, pick stocks. >> we'll get to some of those. >> and i think the market will be up. >> has that opened already? >> i'm not going to give you anything unopened. it's a violation of some rule. >> so you brought like a company. >> michael bloomberg in answer to a question said you eliminate the 16 ounce drink he said yeah, but that's soft drinks. maker's mark 16 ounces is the favorite beverage. >> thank you for bringing liquor to the table. coming up weekly jobless claims just minutes away. economists expect first time filings to decrease from 368,000 to 372,000 the previous week. [ male announcer ] don't just reject convention.

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welcome back to "squawk box." we're just seconds away from weekly jobless claims. santelli is standing by at the cme in chicago. and steve liesman is in studio. we're going to get our numbers from rick. i don't know whether rick did the alarm clock. rick what are the numbers? >> people have been demanding it. >> alarm clock, we're we go. 371,000 on claims.

that's an increase of 4,000 from the revised number, which turns out to be 367,000 for last week. but it was originally reported at 372,000. so if we had left it the same we'd be down one with the revision we're up four. neither, in my opinion, is going to sway the ship of opinion one way or the other. continuing claims, though, took a bit of a dip. and there's a different time line to continuing claims. originally released at about 3.25 million. they were downgraded a bit to 3.236 and now they're at 3.109 so about 3.11. indeed there is a drop there. so many places for news. obviously what's going on with china between their imports and exports gives us a logical response in the u.s. marketplace, what's good for global horsepower should be good for selling off in the fixed income markets. we do see a bit of a rise in rates. and, of course, the other big story is we see the dollar/yen literally leapfrogging over 88,

as one of the most notable texas moves in the last several years continues to be the deterioration of the yen against a host of other large currencies. back to you. >> thinking what we'd want you to say. we may do that. when you say are you listening? are you awake? i think we got to do something like that for your alarm clock app. >> i really enjoyed the piece with david boies today. listen my hat is off to andrew, becky, i thought they did a great job. hopefully he'll do better than when he represented gore. one response i would have is, i think it was thomas jefferson that said, any government big enough to give you everything you need is a government big enough to take it all away. i ponder that in the whole context of aig. >> i was watching him. i liked him a lot more, too, than with those hanging chads. i said that to him. >> i know. joe that was the only christmas party i ever went to in 2000 and

i still remember you running around, you were not happy about the whole chad thing. it's a memory i cherish. >> you know it sounds like your morning cry is going to be the one about good morning vietnam. good morning "squawk box." >> absolutely. >> and steve, steve did the night time one. >> i brought along some more stuff that can be potentially used for the night time. can't sleep. you know for the ambien replacement. >> all-american survey? >> no. better than that. better than that. i brought along the seasonal adjustment patterns for jobless claims for just this reason. people like say, in australia or somewhere trying to get to bed early. put that up. see that chart right there? steve -- >> is this helping ratings? i don't know. >> i want to show you the seasonal adjustments of jobless claims that shows you the january and december are the months -- >> that looks like jack lew's

signature. >> it does. >> no it's not quite as circular. >> we have the signature. that tells you that these are months of high volatility, and that we want to just take these numbers with a bit of a grain of salt although they are remarkably well behaved. and i mean no one's gone out and -- no one's gone out and driven a car asleep after getting put to sleep by you. >> time now -- >> people listening in their car, driving this morning. >> as you think about the seasonal adjustment. >> i will say one thing real quickly. jpmorgan with a report suggesting that the second half of '13 with some of the things that we've been talking about relative to the vix being a little less volatile. maybe the edge is coming off the apocalypse trade. i saw another report that said risk with a short leash. maybe mario has some thoughts about that for your next segment. they're looking for global growth to pick up in the second half so you today about 2.5 in the first half. maybe you go up above 3% in the second half.

china rebounding and the idea of corporate profits having been under such stress over the past quarter, still we're going to do 6% year on year on the s&p. mario, not a bad number that we might end up doing. and then if you have europe coming back or at least not falling anymore, maybe china on the rebound. the corporate profit picture according to the buddy -- the guys over at high frequency economics they say it might look better. >> is that wake-up stuff or sleep stuff? i don't know. >> china and japan are enormous engines in the global marketplace. if you can get the u.s. humming and europe flattening out which should happen in 2014, assuming other things. >> and congress will be short to snatch that to defeat from the jaws of that victory with a massive and messy debt ceiling debate. >> thank you, steve. >> sure my pleasure. >> thank you, rick. >> what are you going to say for the next 90 days then? >> i got nothing. >> when we come back we will be monitoring the ecb president mario draghi's news conference. we'll bring you the highlights as we get them. plus a retailer that is getting hard-hit.

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welcome back to "squawk box," everyone.

shares of arrow postal getting hit hard this morning. the retailer reporting weaker holiday sales. as a result arrow postal is cutting its earnings guidance and you can see that stock is down by almost 10% this morning. also tiffany shares also down pretty sharply after the company reported weaker than expected holiday season sales and pushed earnings guidance down to the lower end of the prior guidance. this was disappointing and the company did say it missed its claim. that stock down by about 8.6%. >> coming up, the fight to bring america back from the brink of fiscal disaster. verifone's ceo is going to be joining us, a member of the fix the debt campaign. we're going to ask him how to rein in the federal deficit, when we return. are you still using an alarm clock that doesn't give you the latest market news? ♪ [ bleep ] [ bleep ] [ bleep ] >> don't be a sucker. download the cnbc alarm clock from the apple app store, and

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welcome back, everyone. the united states is set to hit its borrowing limit in a little more than a month. with no sign of progress from lawmakers on the solution to our debt crisis or any solution when it comes to the sequestration,

that obviously brings a lot of concern when it comes to the markets, and just what's going to happen in the economy. joining us from san jose is doug bergeron, chairman and ceo of verifone. he's also part of the fix the debt committee. and, doug, thank you very much for being here today. >> good morning. >> we know that this is coming to a head. we know the conditions are coming. we spoke with roger altman a little earlier about this and he thinks that this battle is going to be even bigger than the battle over the fiscal cliff. how about you? >> i agree with roger on this. i mean, the january 1st agreement was real ly as senato simpson and erskine bowles have said a missed opportunity. a missed magic moment. because we didn't really address any of the longer-term issues around insolvency. around entitlement reform. most of what was put forward on january the 1st was gimmicky and very short-term oriented. and the rubber is going to hit the road very quickly here. >> what do you want to see happen? because i've also spoken with a lot of corporate leaders who say

that it would be deficiting if we actually don't increase the debt ceiling and that that would hurt confidence in the united states, it could raise interest costs over the long-term. we want to see something done, but do you want to see it done with the debt ceiling? >> yeah. i agree. we have to get the debt ceiling raised. it would have unintended consequences globally, and with respect to the confidence of the u.s. economy worldwide. but imempathetic with those in congress that look at this as a moment in time that they have a little bit of leverage. the leaders of the senate, and the white house, have not organically put forward serious entitlement or spending reforms on their own. and in my mind, it's kind of like someone in your family who is suffering from a serious problem, maybe a substance abuse problem, or alcoholism, and you want to help them out, you want to help them get through the next series of challenges. in fact, maybe give them some

money. but often you don't want to give money to people that need help without strings attached. and i think that's the sentiment that's being shaped in congress right now. the reality is, of course, we have to raise the ceiling, because we have to move on. these are dollars that have already been appropriated, in many cases spent. what has to happen, though, is a dialogue whether it's before or after around serious entitlement reform. and that hasn't taken place. when, you know, when i talked to politicians about reducing the size of the deficit, i always hear things like, well, we're going to reduce waste in government. or we're going to reduce discretionary spending. there isn't enough waste in government, or discretionary spending, to make a serious kick or a dent in the long-term fiscal problems that we have, unless we address right square in the eye entitlement reform. >> doug, there's a front page story in the new york times today about the fix the debt campaign itself. i don't know if you had a chance

to see it but it's interesting because it talks about all of the members of the fix the debt campaign who clearly are looking for a bipartisan grand solution and yet at the same time, clearly as the ceo of your own company, and others who are affiliated with other companies have their own issues and their own interests, and so there's lobbying going on behind the scenes. one obviously on the fix the debt campaign, but then separately on the individual missions of each enterprise, and so many of them still trying to push for different corporate tax loopholes. are you prepared to say right now, for example, that you would just say, you know what? we're not going to ask for anything as a company. we're going to stop any of our own lobbying while this is going on so we can get a grand bargain? >> yeah, i can't speak for my colleagues on the committee. all i can say with respect to me and to verifone is we have no agenda. we have no axes. we don't even have lobbyists. i'm here as a father of five who is desperately worried about the future of this country. a country i love so very much.

we have to fix these problems. i'm sure there's different constituent groups within these various dialogues in washington that are looking out as well and you'll have to ask them directly, on that. >> you know, doug, one thing that we did hear from roger earlier today is that even if we get through the debt ceiling, what could happen is that the sequestration that's been pushed off two months to march 1st, those cuts just go into effect if we can't reach any sort of agreement. would you be okay with that happening as a way of bringing down spending? >> well, it's a fairly low-tech algorit algorithmic way to cut spending, i agree. but maybe it's the first step. ultimately what this has to end up in is a serious discussion on entitlements, specifically health care costs, long-term health care costs, given the demographics, given the shape of the curve, are going to bankrupt this country. social security, we have to look at it. we have to look at, you know, ages of receiving social

security, means testing, all of those things. and as i said the last time i was on your show, if you address those two major issues, which are really longer-term problems and shorter-term problems the math shows that the long-term impact is dramatic, and the short-term impact is much less edgy than the type of sequestration cuts that we're talking about right now. >> you got my vote, doug. >> thank you. >> doug, thank you very much for joining us. >> nice to see you again. >> you, too. >> all right, coming up, jim cramer's take on aig, herbalife, and the other stocks that are on the move today. we head down to the new york stock exchange next. and if there are any bunch questions you're dying to ask me, you can get your chance today, right after the show. you want my take on jock lew as treasury secretary? are you curious about how andrew and i decide what to wear every day so that we don't clash?

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take a look at futures. see how the market is setting up. dow would be up about 58 points. s&p open closer to 9 higher. nasdaq would open over 21 points higher. let's check on stocks to watch. ford dividends not seen since 2006. albertson's offer to go buy 30% of super valu for $4 per share. let's get down to the new york stock exchange and jim and david. >> nokia, clearwire, supervalu, you're not supposed to make money in $3 stocks. alert people at home, this is

highly unusual. these are supposed to go to zero. instead they're headed higher. i guess sprint was the template last year. >> i guess the question then becomes will where he start looking at other $3 stocks in this environment. >> i say we have to sell those. we may have just hit every $3 stock there is. >> where is radio shack these days? >> oh, don't, just by mention going it -- it's a wild day, andrew. your interview with her herbal life, that was one of the best i've heard in ages. every one of you did tear risk. >> is it in your charitable trust? >> no. is it investable for a big institution? is it the right thing to be? and i got to tell you, once again, joe, if it isn't special, but just one kind of product,

then is it the distribution system. they have this outfit lieberman and always saying lieberman says that 90% goes to the customer. i don't know lieberman. >> so who do you bet on in this case? dan or bill? gr who do you bet on in the -- i don't think -- >> the battle of central park west actually. >> sometimes you throw your hands up. i know that if you get a government guy to come in and say wait a second, we have to protect the people who buy this will thing even as the gentleman said, look, no need for that, then i think that they have to change the rules for direct selling and they could ratchet it down. they could literally do a reset as our friend herb says that would be like apollo and itt educational. that would be your nightmare. and otherwise the company is making a lot of money. >> andrew, given your experience with those two guy, do you have

an opinion that you would share? >> we were talking about it yesterday. my accepts is that when bill ackman is successful, it's a grand slam. but when he's unsuccessful, he sometimes strikes out. dan lobe more generally has a greater consistency to it. the ultimate results may not be that different, but it makes it harder in my mind to therefore make a judgment, so i'm probably with jim in terms of throwing up my hands. but that's my quick analysis. >> i have some hong kong dollar calls that i still would like to sell either one of you guys. >> people like canadian pacific this morning. >> how about your partnership interest in that target -- >> i got some of that, too, along with my hong kong dollar options. >> if you're a rino, you did not mean the horrible neighborhood comment to make a judgment. i think that your video analysis was important. because that's -- take a breath

away situation. saying, wow, this thing -- maybe this thing is undercover -- herb went undercover. i remember when food line got hit by the undercover and that didn't work out. undercover work is incredible and if the late mike wallace within involved, it would be a three. >> i think he'd be proud of what herb has done. a tremendous documentary. >> the a work it that herb has done is incredible. it's the trilogy. >> guy, we'll see you in a few minutes. want to take you about a few quick comments out of mario draghi. he said there are strong capital in-flows in the euro area. he says the real economy continues to be weak. he also says we are not thinking about an exit now. and that we will see better credit conditions. stocks have been picking up on these ideas. when we come back, we'll have more investment ideas. what are you doing?

nothing. are you stealing our daughter's school supplies and taking them to work? no, i was just looking for my stapler and my... this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go... we got clients in today. [ male announcer ] save on ground shipping at fedex office.

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